Combining unique and hugely valuable trophy development assets with an excellent and highly incentivized management team, HHC is arguably the worlds “best” real-estate company. Noteworthy assets include:

  • Ward Centers in Honolulu – 60 acres of under developed ocean front property where HHC is building several towers with high end residential and commercial spaces.
  • Summerlin MPC in Las Vegas – Developing 22,500 Acres of in demand residential, retail, and office space.
  • South Street Sea Port in Manhattan – Developing over a million square feet of high end retail space.
  • Houston, Texas MPC’s (Bridgeland and Woodlands) – Developing over 30,000 acres of in demand residential, commercial, office, and hotel spaces.
  • Additional valuable assets under development in Princeton-NJ, New Orleans, AlexandriaVA and Columbia-MD.

As in previous years, HHC continues to make strong progress developing its assets into income producing properties. The stock recovered somewhat in 2016 as concerns about the Houston MPC’s indirect exposure to energy proved overdone. Oil & Gas account for only 11% of Houston’s economy and the Houston MPC’s account for only about 25% of HHC’s assets. While HHC did experience a slowdown in Houston area sales, it was not as severe as the markets initially expected.

We estimate HHC’s net asset value to be around $190 per share and growing. The current share price ($118) seems compelling to us and provides a potential double (or more) over the next few years as net asset value increases. We believe the company will restructure itself as a REIT once its ongoing NOI becomes significant and this could serve as a catalyst for the markets to recognize its intrinsic value.

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The above commentary has been excerpted from a letter to clients of Emerging Value Capital Management.

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